For most households, higher burdens are expected to come in the next year. Above all, the rising social contributions led to the fact that citizens will have less net income in 2025, as reported by “Welt am Sonntag” based on calculations by the industry-related Institute of the German Economy (IW). The planned tax relief by the parties of the former coalition government did not suffice to offset the negative effects.
For example, for a single person with an average gross income of 50,000 euros per year, the additional burden would only be reduced from 233 euros to 38 euros net per year. Even for single parents, the increased child benefit and the changed income tax rate did not suffice in many cases to turn a minus into a plus. Only jointly assessed couples with children could, depending on their income, look forward to more net income.
“For the taxpayers, the compensation for the cold progression would be important to at least mitigate the burden effects” said IW tax expert Martin Beznoska. The burden effects include higher contributions to health and long-term care insurance, the upper limits of the contribution assessment ceiling, and the further increasing CO2 emission fee, which leads to higher prices at the pump and for heating, starting from January 1.
The factions of the former coalition government agreed on Friday to dismantle the cold progression and increase child benefit. The Bundestag and the Bundesrat still need to approve this.